A Graduation Gift That Grows
Spring is here and that means graduation season is here too. You may have a high school graduate, middle school, elementary, or even preschool graduate. Photos, parties, and gifts often accompany these milestone events in your children’s lives. Family and friends may honor the occasion by giving gifts to celebrate. Many write checks or give cash directly to the graduate. There is a way to make a generous gift even better – one that keeps on growing long after graduation is over: a contribution to a 529 education savings account with The Education Plan®. It pays for higher education expenses, with potential tax benefits for the giver. So, when relatives or friends ask, “What should I give?” direct them to your child’s 529 plan.
Encouraging Giving
A 529 plan is an education savings account. Contributions are tax-free – even lump-sum gifts for the graduate. This means that you pay no federal taxes on earnings and withdrawals as long as the funds are used for qualified education expenses. It may not be the most glamorous gift, but it is one that can reduce the loan burden on children and families and contribute to a brighter future for the graduate. Encourage grandparents, relatives, and family friends to contribute to the graduate’s 529 account, rather than writing a check to the graduate or giving cash that may be gone within days. These gifts may be given for special events, such as graduations or holidays, or at any time of the year: every contribution helps relieve the financial stressors that come with college attendance.
Make your gift feel even more special with these downloadable gift certificates for special occasions, including graduations, birthdays and more.
Contributing to the Account
Anyone can establish a 529 plan with The Education Plan for anyone, at any time, with any amount, and starting early is encouraged for additional savings. Contributions may come from anyone - parents, grandparents, aunts, uncles, friends, and others. Contributions may be made in many ways: lump sums – like graduation gifts – by check, a recurring or one-time electronic funds transfer, payroll contributions, or roll over funds from another 529 account. It doesn’t matter who contributes or how much, you maintain control of the account and decide when and how to distribute its funds.
Withdrawing Funds
The funds in a 529 education savings account must be used for qualified education expenses; otherwise, the withdrawals will be taxed, plus a 10% penalty. Qualified withdrawals may be for tuition, room and board, textbooks, lab fees, computer, internet and software, and even notebooks, if needed for academics. Some study abroad programs qualify as well. Higher education can mean a 4-year college or university, apprentice programs, community college, technical/vocational school, and graduate school, as long as your student is enrolled at least part-time.
Giving for the Future
Discuss with your family and friends the importance of higher education for your child and ask them to make the check out to your child’s 529 account rather than your graduate. This ensures funds go where they are needed most – to pay for the increasing cost of college. Contributions from multiple people can add up to significant savings to cover a variety of education expenses.
Another way to contribute is through Ugift. With Ugift, The Education Plan makes the process of gift-giving simple. Ugift provides a unique code that friends and family can use to contribute to a 529 account quickly and easily. Share the code with loved ones so they can contribute to the 529 education savings account directly.
Graduation is not a time to look behind, but a time to look ahead. Commencement is the beginning of a new stage in your child’s life, and the perfect time to invest in their future by contributing to a 529 education savings account. Encourage gift-giving for something that matters long after that cap and gown are put away.
Frequently Asked Questions
A 529 plan is a tax-advantaged investment account that is designed to grow savings for future education expenses for a specified beneficiary. 529 plans offer unique benefits and features that make them an appealing strategy for education related saving.
A 529 plan can be used for “qualified educational expenses.” For federal tax purposes, qualified educational expenses include:
- Tuition and fees at accredited higher education institutions
- Books
- Supplies and equipment
- Room and board for beneficiaries attending on at least a half-time basis.
- Computer technology, equipment, and internet access
- Up to $10,000 a year for K-12 tuition and expenses (Limit increase to $20,000 in 2026)
- Expenses for educational special needs services
- Transfers to an ABLE account for the beneficiary (transfer subject to annual limit)
- Apprenticeship expenses
- Up to $10,000 for student loan repayment
- Credentialing expenses and certification programs
- Roth IRA rollover for the beneficiary
If you're not sure if an expense is considered "qualified," we recommend consulting with a tax professional or advisor. Unqualified expenses will be treated like ordinary income: state and federal taxes will apply, with a 10% federal penalty for withdrawals from your 529 plan used to pay for them.
New Mexico residents can deduct contributions to The Education Plan from their state taxable income each year. This includes contributions made to an account that you are not the account owner of.
You cannot deduct contributions from federal income taxes.
Any person at least 18 years old with a valid Social Security Number (SSN) or Tax Identification Number (TIN) can open a 529 account. The account holder chooses the investment options, designates a beneficiary, and requests the distribution of funds.
The cost of college continues to rise, including tuition, housing, food and supplies, so it’s important to begin saving as soon as possible. You can learn more about how much a typical college education costs on our Cost of College page. It’s never too early or too late to start.
The Education Plan offers a variety of investment options to fit you and your family’s needs, risk tolerance and goals. You can see all of the available investment portfolios on the investments page.
Yes, you can use up to $20,000* a year to cover tuition and expenses for K-12 education.
Qualified K-12 expenses include:
- Tuition (public, private, and religious)
- Curriculum materials, books (including digital/online) and instructional materials
- Tutoring and instructional classes**
- Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission
- Dual enrollment program fees
Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies
*Starting in tax year 2026. The annual limit is $10,000 in tax year 2025 and permitted for tuition only.
**Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—
(i) is licensed as a teacher in any State,
(ii) has taught at an eligible educational institution,
or (iii) is a subject matter expert in the relevant subject.
You can open an account with The Education Plan online or by mailing in the enrollment form. In order to open an account, you will need the following information:
- Your social security number or TIN
- Your address
- Your bank account information (in order to fund the account)
- The beneficiary’s social security number or TIN
- The beneficiary’s birthday
-The beneficiary’s address
